Understanding crypto’s summer meltdown: a look at 2017’s biggest ICOs
With the 2018 bear crypto market in full swing and ICO projects losing up to 98% of their market value, it is beneficial to take a step back and examine how we got ourselves into the current situation. 2017 was the genesis year of the ICO fundraising boom. Projects raised billions of dollars in funding, promising a world where file storage, governance, and financial systems are decentralized.
The three largest ICOs in Q3 of 2017 were: Filecoin, Tezos, and Bancor. In total, these projects raised $647m in funding. But a year after their ICOs, these projects have been underwhelming. Let’s take a look.
Filecoin ($262m raised in ICO): Filecoin (a project of Protocol Labs) is built as an incentive mechanism for storing and transferring files on IPFS, the impressively named InterPlanetary File System. Currently, users on IPFS “pin”, or store & serve, files to their computers or centralized cloud servers. Filecoin was created to incentivize the decentralized storage of files on IPFS. However, while projects are building on IPFS, a marketplace for file storage has yet to be seen. This lack of a marketplace is because Filecoin, in its current state, cannot be used on IPFS. And while Protocol Labs has been scouting for early users and miners for Filecoin, the current IPFS network still lacks an incentive mechanism for decentralizing file storage.
Tezos ($232m raised in ICO): Tezos is a decentralized application and smart contracts platform built with on-chain governance. Disputes between executives significantly delayed the project. The Tezos’ management team managed to resolve the disputes in early 2018. Recently, Tezos launched its Betanet enabling transaction to be processed and validated. The project also announced plans for a mainnet launch in Q3 of 2018.
Bancor ($153m raised in ICO): Bancor is a decentralized cryptocurrency exchange and liquidity provider. The project is live on the Ethereum blockchain and has 128 daily active users. From June 2017 to September 2018 Bancor processed ~303k ETH transactions on its network and is now in the process of enabling cross-chain transactions.
While it may be harsh to judge blockchain projects a year after they have launched, the limited progress in their development may explain why we are currently in a bear market. ICO projects opened up to much fanfare in 2017, with each new project promising seamlessly unachievable goals. This euphoria, boosted by the unending media coverage, pushed the price of many of the native tokens of these projects beyond what they could realistically command. When investors finally realize that most projects aren’t shipping actual products, the bears took hold and did not let go.
